How effective is Samia in managing the economy?

What you need to know:

  • President Hassan appears to be a much more level-headed leader, who will most likely attract more FDIs, encourage the expansion of the private sector, leading to greater economic growth

In the later years of the Magufuli presidency, a senior diplomat was posted to Tanzania from a European nation. Upon arrival, he asked around for the list of “who’s who” in Tanzania, and was given one that apparently excluded the name of the then Vice President. When he asked why, he was told that “she doesn’t have any real power”.

Not so long later, that Vice President became President – sending the diplomat and his team back to the drawing board.

To say that Ms Samia Suluhu Hassan’s presidency was unexpected is a gross understatement. Many misguidedly considered her as a figurehead, conveniently ignoring the fact that she was just a heartbeat away from the presidency. Remarkably, as she herself has revealed, this continued even after she became president. Ms Hassan is not “just another woman”. She is now the most powerful person in the land, holding vast powers that Tanzania’s imprudent constitution places at the President’s disposal.

Many articles have been written providing a litany of things President Hassan has done during her first year in office. It is not my intention to produce yet another list. There is a big difference between reporting and interpreting issues.

However, I think that I have found it uncharacteristically easier to excuse much of what is happening now given how low the leadership bar was set by the previous administration. But to give President Hassan credit, it is also possible that she has been so good as a moderating force that she can hardly be faulted in that regard.

Her leadership approach has certain identifiable characteristics. Given space limitations, I will try to answer one question: how effective is President Hassan – a development economist – in managing the economy?

Also immediately after coming into office, she indicated her intention to maintain the course set by Magufuli by sustaining public investment in big infrastructure projects such as the standard gauge railway (SGR), Julius Nyerere Hydropower Project (JNHPP), airports, flyovers, purchase of airplanes, etc. It is unlikely that she had much choice in that regard. A $7 billion project like the SGR, which is unlikely to become economically viable anytime soon, will become an even greater liability if left uncompleted.

However, while President Hassan’s government can be excused for striving to complete some of these projects, its continued investment in non-productive projects reflects bad economics, which may end up costing the nation dearly.

Scholars observe that a desirable threshold for public investment is about 10 percent of GDP. This means that scaling up investments beyond that threshold comes at both higher costs and lower returns. In Tanzania, some analysts put the public investment figure a year or so ago at 20 percent. Needless to say, something is not right.

That the Magufuli government had to prop up economic activities through massive infrastructure projects so as to report a respectable growth figure after mismanaging the economy in its early years was obvious. But it is quite baffling why President Hassan has chosen to maintain that course. It is unwise to use loans to invest in expensive projects, which have low rates of returns. So, whenever I hear more about Dodoma, flyovers, new airplanes, new airports, etc, I wonder – don’t we have better things to do with that money?

Public investment aside, President Hassan has made commendable efforts to reintegrate Tanzania with the regional and global economies through economic diplomacy, ratifying AfCFTA, projecting an investor-friendly image, promoting the private sector, and improving the business environment. Billions of shillings have been invested in rebranding Tanzania – with the President directly championing the Royal Tour production, and the Dubai Expo exhibition.

The results have been dramatic. For example, in her first six months in office, foreign direct investments (FDIs) have quadrupled from $1 billion in 2020 to $4 billion. Similarly, the government appears to be bullish enough about investments in mining that it is projecting that the sector’s contribution as a percentage of GDP will increase from of 5.5 in 2015 to 10 percent. If these projects will be coupled with Magufuli-like efficiency in execution, this is the change that Tanzanians needs.

That aside, one of Tanzania’s biggest economic challenges is low productivity. A huge percentage of its population is involved in agriculture, working hard for very little. Across numerous sectors, the same story is repeated over and over . To uplift the people from poverty, the economy needs to be modernised to increase production and productivity. Unfortunately, this has yet to be prioritised.

For example, the Mtwara Development Corridor Project, which aims to integrate Mtwara, Lindi, Njombe, Ruvuma and Mbeya regions, plus northern parts of Mozambique, parts of Malawi and Zambia, into a single economic zone is a highly transformative project that can lift millions out of poverty, but it is progressing at a snail’s pace, four decades since its inception.

Had the trillions that have been poured into vanity projects been invested directly in productive sectors of the economy such as agriculture, industries, tourism, ICT, energy, and mining, the medium and long-term economic outlooks would have been much better.

In comparison with her predecessor, President Hassan appears to be a much more level-headed leader, who will most likely attract more FDIs, encourage the expansion of the private sector, leading to greater economic growth. However, when it comes to public investments, so much is being done, which should not be done, and so much isn’t being done, which should be done.

This is where there is so much room for improvement.